Buying an Existing Franchise in Australia: Check the Transfer

Buying an established franchise means dealing with both the selling franchisee and the franchisor. An agreed purchase price does not, by itself, give you permission to operate under the brand. Before committing, establish how the franchise rights will pass to you and make sure the business purchase and franchise paperwork work together.

Establish exactly what is being transferred

An existing outlet can be offered for sale with familiar branding, customers and an operating team. However, buying its business assets is not the same as acquiring the contractual right to operate within the franchise community.

Ask the seller and franchisor whether you will take over the existing franchise agreement or enter into a new one. Do not assume that buying an established business gives you a fresh franchise term.

Request written answers to these questions:

• Which agreement will authorise you to operate after settlement?
• If the existing agreement is transferred, how much of its term remains?
• Will its terms change as part of the transfer?
• Which seller-specific concessions, variations or side letters will continue?
• What additional documents must you sign?

A seller may currently benefit from a reduced fee or another negotiated arrangement that does not pass to the buyer. Equally, a new agreement may impose different obligations from those reflected in the outlet’s historical accounts.

Have your lawyer compare the proposed documents with the seller’s agreement and any written variations. Ask your accountant to assess the purchase using the obligations that will actually apply to you, rather than simply adopting the seller’s current costs.

Understand the franchisor’s consent process

Australia’s mandatory Franchising Code of Conduct regulates the relationship between franchisors and franchisees. The current Code commenced on 1 April 2025 and is enforced by the Australian Competition and Consumer Commission. Contract law and the Australian Consumer Law also remain relevant to the purchase.

Under the Code, a franchisee seeking to transfer their agreement must ask the franchisor in writing. The franchisor must consider that request and cannot unreasonably refuse consent. This is not an automatic entitlement for any proposed buyer to take over an outlet.

Before paying a deposit, ask for the franchisor’s transfer requirements and establish who will submit the request. Find out what information the franchisor needs about your finances, experience and proposed operating arrangements, and whether interviews or training form part of its assessment.

Keep a clear distinction between informal encouragement and formal approval. A conversation with a recruitment manager, for example, should not be treated as confirmation that all transfer conditions have been satisfied.

Ask your lawyer to explain the applicable consent procedure and deadlines. Keep dated copies of the request, supporting documents, further information requests and the eventual decision.

Review the documents and transfer costs together

The seller’s sales pack is not a substitute for disclosure from the franchisor. The ACCC says prospective franchisees must receive the franchise agreement, including an existing agreement being transferred, the disclosure document and a copy of the Code. An information statement must also be provided under the Code’s requirements.

Use those documents to build a transfer checklist. Alongside each condition, record who must satisfy it, what evidence is needed and whether it creates a cost.

Potential items to ask about include:

• Any transfer or application fee and who pays it.
• Required buyer training and associated travel expenses.
• Outstanding seller obligations that must be resolved.
• Changes to systems or business presentation required for approval.
• Deposits or account arrangements needed to begin trading.

These are matters to investigate, not charges that necessarily apply to every purchase. Ask for the contractual basis and calculation of each proposed payment, including whether it is refundable if the transaction does not proceed.

Do not accept a general assurance that you are taking over “everything”. Identify precisely which rights and liabilities transfer, and which remain with the seller.

Make settlement depend on the right approvals

Your business sale contract and franchise documents should lead to the same practical outcome: you pay for a business you are authorised to operate.

Ask your lawyer to make the purchase appropriately conditional on franchisor consent and satisfactory franchise documentation. The contract should address what happens if approval is refused, delayed or offered on materially different terms. It should also explain how any deposit is handled in those circumstances.

Prepare a settlement checklist covering signed documents, completed approval conditions, payment responsibilities and the date your franchise rights begin. Avoid a gap in which you own the business assets but cannot lawfully use the brand.

Practical takeaway: Before buying an existing franchise, confirm the agreement you will receive, obtain written transfer approval and align settlement with every condition needed to start operating.